CBOT grains volatile as speculative funds rise, with corn, soybeans, and wheat diverging.

On January 15,Hong Kong currency exchange the CBOT grain futures market showed a clear divergence. Corn and soybeans experienced a slight pullback after previous price increases due to increased cash sales by farmers, while wheat futures remained stable supported by international demand. The latest USDA report has led to expectations of tighter supply, providing context for recent market fluctuations. Meanwhile, commodity funds have increased their net long positions in major grain varieties for three consecutive days, offering some support to the market.

Corn: High-Level Pullback, but Tight Supply Supports Prices

Recently, CBOT corn futures prices have slightly retreated after reaching a one-year high. The USDA lowered its projections for the 2024 corn harvest and year-end stocks, which fueled earlier price increases. However, with high prices, farmers actively engaged in cash sales to replenish the export supply chain, putting pressure on prices. Internationally, the Chinese Taipei MFIG procurement group tendered for 65,000 tons of animal feed corn, with potential sources including the US, Argentina, Brazil, or South Africa, indicating stable international demand.

Looking ahead, although farmer sales exert pressure on prices, speculative fund support and a fundamentally tight supply may keep corn prices strong. However, attention should be paid to the possible global supply improvement due to better weather conditions in Argentina.

Soybeans: Divergent Demand Suppresses Growth

CBOT soybean futures saw a pullback after hitting a three-month high. Although the US sold 198,000 tons of soybeans to China over two consecutive days, Chinese buyers have recently favored the cheaper new crop from Brazil, reducing demand for US soybeans. Simultaneously, US domestic soybean crushing output hit a record high in December, leading to an oversupply of soybean meal and further suppressing the basis performance. NOPA data shows that December soybean crushing volume increased by 5.2% year-on-year, reaching 205.5 million bushels.

Looking to the future, improved weather in Argentina may ease supply tightness expectations, restraining price increases. Meanwhile, the increase in fund net longs shows market sentiment remains optimistic, but divergent demand might continue to suppress prices.

Soy Oil and Soymeal: Supply and Demand Imbalance Puts Pressure on the Market

Soy oil and soymeal markets have been under pressure recently. The soybean meal basis weakened due to an oversupply, and the addition of new crushing capacity in the US exacerbated the supply issue further. On January 14, March soybean meal futures fell to $405.8 per short ton. Although speculative fund net longs have increased in the soy oil market, the abundant supply background limits the rebound space for prices. Moreover, the upcoming Brazilian new crop may pose competition to US soy oil exports.

In the short term, soy oil and soymeal pricing trends will be influenced by crushing output and international demand, with the market's ability to absorb inventory being key.

Wheat: International Procurement Supports Market Stability

The wheat market is relatively stable. Japan's agriculture department plans to purchase 132,800 tons of food-grade wheat, and Jordan completed the procurement of 60,000 tons of hard wheat, providing support for the market. Additionally, the US domestic hard red winter wheat (HRW) basis is affected by weather fluctuations, but the risk of winter damage is limited. KCBT March wheat futures slightly increased to $6.61-1/4 per bushel, reflecting the market's cautious attitude towards current supply and demand relationships.

Speculative fund increases also provide some support to wheat prices, but there is a lack of significant upward momentum in the short term.

Market Trend Outlook

Overall, the CBOT grain market in the short term will continue to be dominated by speculative funds, basis changes, and international trade dynamics. The pullback in corn and soybean prices may build momentum for future increases but caution is warranted regarding potential bearish impacts from improved supply expectations in Argentina. Soymeal and soy oil are constrained by supply and demand imbalances limiting rebound space, while wheat may maintain relative stability backed by international procurement. Investors should closely monitor weather changes and global trade patterns for further market impacts.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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